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The Sportbrain case illustrates how IPR proceedings can form a powerful and efficient tool for defendants. They serve as a unique means for parties to challenge the validity of a patent. In an IPR, the petitioner, or patent challenger, argues that the court should invalidate a granted patent based on references that precede the filing of the patent at issue. The PTAB will then issue a decision listing which parts of the patent may be contested during trial. Assuming the parties do not settle after that decision, they will proceed to a trial in front of a panel of three PTAB judges, and that panel will determine which portions of the patent, if any, are invalid.

IPRs have many aspects that can favor those challenging patents. First, they (currently) use a broader claim construction standard than regular district court proceedings. This means a PTAB panel is more likely to interpret any claims in a favorable light for invalidity purposes. Second, the PTAB applies a lower burden of proof in IPRs. The petitioner only has to prove its case by a “preponderance of the evidence” standard, a noticeably lower burden than the standard of “clear and convincing evidence” that district courts follow. Last, unlike in district court proceedings, patents are not presumed valid before the PTAB.

The PREVAIL Act would bar most people from petitioning the U.S. Patent and Trademark Office (USPTO) to revoke patents that never should have been granted in the first place. 

The U.S. Patent and Trademark Office (USPTO) issues hundreds of thousands of patents every year, with less than 20 hours, on average, being devoted to examining each patent. Mistakes happen. 

First, President Biden’s new U.S. Patent and Trademark Office (USPTO) Director was recently confirmed by the Senate. The USPTO already has the tools needed to resolve patent disputes through expert arbiters on the Patent Trial Appeal Board (PTAB). Through the PTAB’s inter partes review (IPR) process, judges who are experts in both patent law and technology can more fairly resolve patent infringement claims, invalidating bad patents that never should have been issued in the first place when they are weaponized against manufacturers and innovators. It’s critical that the new USPTO Director strengthens PTAB and restores the IPR process, allowing the office to mediate these disputes, rather than forcing companies into costly and less effective jury trials.

America’s vital system of patent protections, a crucial catalyst for economic vitality, is currently facing significant challenges. Patents incentivize individuals and companies to innovate by granting them exclusive rights over their inventions for a limited time. However, this system is being exploited by patent litigants who target innovative firms utilizing proprietary technologies as inputs, forcing them into settlement payments and disrupting research, development, and product sales until the legal matters are resolved.

These litigants, often referred to as “patent trolls,” collaborate with hedge-funded patent assertion entities (PAEs) or non-practicing entities that do not engage in innovation or manufacturing but instead amass patents to create portfolios for aggressive legal action. Employing data mining techniques, they identify patents deployed by third-party suppliers within complex supply chains, ultimately suing the final manufacturers for infringement. Leveraging Section 337 investigations at the United States International Trade Commission (ITC), they pressure targeted firms into hefty settlement payments. While the ITC was established in 1916 to combat counterfeit imports, it was never intended to handle patent litigation, despite the reality of today’s global supply chains.

Senior sources from high-tech, gaming and financial services companies explain how they succeed in their inter partes reviews and covered business method actions to invalidate broad patents filed by non-practising entities.

Businesses have had seven years to work out how best to use the US Patent Trial and Appeal Board (PTAB) to invalidate overly broad patents belonging to non-practising entities (NPEs).

Before Congress in April, Director Vidal testified that the U.S. Patent and Trademark Office’s (USPTO) recent Advance Notice of Proposed Rulemaking (ANPRM) on the Patent Trial and Appeal Board “contains a myriad of options, and we want to hear from stakeholders not only on how those provisions might affect them, how we should evolve them, but whether we even have the authority to move forward with them.” And boy, did the public respond. The Office heard from more than 14,500 comments, the most on record for any administrative patent-related action in the USPTO’s long history.

The response was overwhelming, broad-based opposition to the ANPRM’s proposals. More than 95% of all public comments—and nearly 85% of unique comments—opposed the proposals, according to analysis by Unified Patents.

PTAB Standing Requirements Would Harm Small- and Medium-sized Entities (SMEs)

Related to the more general patent trolling concern, many comments specifically raised objections to proposals in the ANPRM that would add new standing requirements for who is allowed to petition for PTAB review. More than 1,500 comments contain the specific phrase “standing requirement” and there are many additional comments that describe the same concept in different ways. Similar standing requirement measures are included in the PREVAIL Act, which would limit review to those who have been sued or are threatened with lawsuits.

The Biden administration and Congress have recently made a series of commitments to support industries that are of high strategic importance. The Inflation Reduction Act and Chips and Science Act provide much-needed resources to bolster advances in green energy and increase our domestic supply of semiconductors – two critical long-term priorities.

Yet, there’s another significant challenge facing our innovation economy, one that often goes under reported. Abusive patent lawsuits against some of our most innovative companies are on the rise, forcing more and more successful businesses to delay hiring new workers, raising wages, and developing new products. Instead, they’re forced to spend money defending themselves against meritless accusations.

The Patent Trial and Appeal Board, or PTAB, is one of the only places in the nation where patent trolls can be held to account for the outrageous and harmful claims they make in their patents. Congress created the “inter partes review” (IPR) process, which is overseen by specialized PTAB judges, more than a decade ago. “Inter partes” simply means “between the parties,” and the IPR process allows members of the public to challenge patents that never should have been granted in the first place.

The IPR process is one of two main ways to challenge patents, along with challenging them in district court. The big difference is that the IPR process, while not simple or cheap, is much faster and cheaper than going to trial in federal court. Invalidating a patent in court can cost millions of dollars, while even a complicated IPR process costs a fraction of that.

Julie Carlson 5/6 2024 (Julie Carlson is Director of Economic Strategy at Qualcomm. Her work focuses on, analyzing policy issues related to intellectual property, standardization, and innovation. Prior to, joining Qualcomm, she was Associate Director for Antitrust and Innovation Policy at the, Information Technology and Innovation Foundation. Julie also served as a senior staff economist, in the Bureau of Economics at the Federal Trade Commission where she assisted with, anticompetitive conduct investigations of technology firms, participated in agency advocacy, and, contributed to agency reports including the FTC report on patent assertion entity activity, 5/6/24, "New Data Show There Is a Problem with the U.S. Patent System—But It’s Not Patent Trolls", https://ipwatchdog.com/2024/05/06/new-data-show-problem-us-patent-system-not-patent-trolls/id=176149/)//rohan

The Marcum report provides further evidence of the pernicious effect the U.S. Supreme Court’s eBay decision has had on the ability of patent owners to enforce the exclusionary right embodied in their patent. Prior research has shown that patent owners are less likely to seek injunctions and those injunctions are less likely to be granted following eBay. It should be no surprise then that there has been a significant decline in injunction grants over the last 15 years. The Marcum report focuses on injunction grants excluding default judgments. They note that “cases with default judgments do not typically represent contested disputes” as the defendant has failed “to take required actions or respond to court proceedings.” The report shows that injunction grants (excluding default judgments) have fallen from a peak of 80 in the period 2008 to 2012 to just 36 in the period 2018 to 2022. That is, in the most recent period, there is an average of just seven injunctions per year—less than half the average in the earlier period. In addition to a low level of injunctions, enhancement of damages is rare. Only 22% of remedies awards were enhanced due to a finding of willful infringement.

2. One of the primary disadvantages of de novo judicial review is the potential for increased judicial workload. Unlike other forms of judicial review, de novo review requires the court to reexamine the entire case from scratch, disregarding any previous decisions made by lower courts. This can significantly increase the time and effort required by judges to thoroughly analyze the facts, evidence, and legal arguments presented. As a result, the court's workload may become overwhelming, leading to delays in the resolution of cases and potentially hindering access to justice.

3. Moreover, de novo review can create uncertainty and unpredictability in the legal system. When a case is subject to de novo review, the parties involved must essentially start over with presenting their arguments and evidence. This can lead to conflicting outcomes, as different judges may reach different conclusions when reevaluating the same case. Such inconsistencies can undermine the stability and predictability of the law, making it difficult for individuals and businesses to anticipate the outcome of their legal disputes.

The most important clarification of step one is that courts must determine, in the exercise of independent judgment, that Congress has actually delegated authority to the agency to interpret the legal provision in question. This is implicit in  (2001), which held that Chevron deference only applies if the agency acts with the force of law in rendering its interpretation. An agency cannot act with the “force of law” unless it has been actually delegated authority to interpret the provision in question.

Step two should be clarified by holding that a “reasonable” interpretation is one that takes into account reliance interests created by past interpretations and is rendered in a format that allows for meaningful public participation, such as notice-and-comment rulemaking.

One of the more ironic talking points from the hearing is that  of PTAB proceedings have related lawsuits in progress, which is evidence of a broken system.  

Congress anticipated that businesses targeted with meritless lawsuits in district court would respond by challenging patents at the PTAB. This was one of the driving forces for creating the more efficient system. Congress urged district courts to pause their cases while patents are reviewed, and they generally do. This avoids unnecessary litigation that might drain resources from plaintiffs and defendants if the patents were granted in error. If PTAB review finds that the patents are valid, then the case continues, not in parallel, but afterward. 

Of course, patent holders would prefer to test the validity of their patent claims under the due process requirements of federal courts.[21] But some patent holders in parallel litigation have also relied on the broad IPR estoppel provisions of the AIA.[22] Assuming these provisions would also be severed from the AIA, retroactivity could now make previously barred defenses available in federal court. Moreover, although vacated, the PTAB’s invalidity determination based on the prior art may leave patent holders questioning the value of their previously dead patent. Would it still be subject to invalidity through reexamination by the USPTO—the same agency that already previously invalidated the patent?[23] Is the patent worth trying to enforce? Even if patent holders find themselves with a patent seemingly back from the dead, it may not be the same as it once was. While many patent holders may disagree with a prospective application of an unconstitutional ruling in Oil States, it still may be the most equitable result.

In enacting the Leahy-Smith America Invents Act (AIA), Congress sought to “establish a more efficient and streamlined patent system that [would] improve patent quality and limit unnecessary and counterproductive litigation costs.” [77 F. Reg. 48680-01 (Aug. 14, 2012).] As part of the AIA, Congress created inter partes reviews (IPR), where the Patent Trial and Appeal Board (PTAB) may review the patentability of patent claims. [See 35 U.S.C. §§ 311-319.] IPRs are intended “to create a timely, cost-effective alternative to litigation.” [77 F. Reg. 48680-01 (Aug. 14, 2012).]

IPRs often occur in parallel with district court patent litigation on the same patent, and district courts must decide whether to proceed with a case when the patent-in-suit becomes the subject of an IPR. Each district court has the inherent power to manage its docket by staying its proceedings pending IPR. Although the test varies by jurisdiction, district courts typically consider three factors when determining whether to stay pending IPR: (1) “whether discovery is complete and whether a trial date has been set;” (2) “whether a stay will simplify the issues in question and trial of the case;” and (3) “whether a stay would unduly prejudice or present a clear tactical disadvantage to the non-moving party.” [Drink Tanks Corp. v. Growlerworks, Inc., No. 3:16-cv-410-SI, 2016 WL 3844209, at *2 (D. Or. July 15, 2016).]

The decrease in granted petitions may also be tied to the type of patents now being challenged, in particular, the overall strength of those patents. The early IPR petitions appeared to focus on the weakest patents, a point that Judge Smith noted during a 2014 meeting of the U.S. Patent and Trademark Office's Patent Public Advisory Committee. Indeed the stated goal of the AIA was to give the Patent Office a "toolbox" of new proceedings to "weed out low quality patents… includ[ing] post-grant review, IPR, supplemental examination, and derivation proceedings, as well as a transitional post-grant review program for certain business methods patents." 14 Although the success rate of patent challengers has remained high--at least at trial--challengers have been emboldened to utilize the process, resulting in an increased number of IPR petitions and, according to many practitioners, a higher caliber of patents being challenged. 15 For instance, patent office statistics show that the number of filed IPR petitions more than doubled between 2013 and 2014 and has remained relatively steady since then, evidencing that patent challengers have embraced the PTAB's IPR procedures as a desired alternative to district court litigation. The PTAB has become the largest venue for patent disputes, with 461 petitions filed in the first quarter of 2016, compared with 288 filings in the same period for its nearest competitor, the Eastern  [*17]  District of Texas. 16

If the Federal Circuit considered invalidated patents via retroactive application of IPR to pre-AIA patents as an unconstitutional taking, the court would have been altering the level of deference typically afforded in cases of economic rights and broadening judicial enforcement in an inappropriate manner. The resulting administrative burden of providing patent owners just compensation after Celgene would congest the USPTO, judiciary, or legislature, and ultimately result in governmental stagnation.

In the initial months after the enactment of the America Invents Act, little was known about how the newly crafted post-grant procedures would affect patent litigation in federal district court. As the clouds parted and the Patent Trial and Appeal Board (PTAB) issued its first decisions, new beacons have emerged which are altering the way that parties navigate patent litigation. In particular, the decision to institute review has become a rising star of the PTAB, with its gravitational pull reaching beyond just “real parties in interest”, but also warping the litigation fabric for surrounding “related matters”.

Previous commentators have addressed a variety of statistics and trends at the PTAB, including institution, invalidity, settlement rates and district court stays. This study explores the PTAB’s ripple effects in district court and shows that there is a correlation between litigation settlement timings and PTAB institution decisions, even for defendants which are not real parties to the PTAB proceedings.

In this new environment, de novo review of PTAB rulings on case-specific matters seems like a waste of judicial resources that conflicts with legislative priorities. It encourages costly and time-consuming appeals and threatens to undermine the effectiveness of the AIA in providing a quicker, cheaper, and more expert alternative to district court litigation. As its caseload rises, the Federal Circuit would do better to confine its use of de novo review to generalizable legal rulings that provide guidance to the PTAB and the courts in future matters, rather than attempting to replicate the work of the PTAB from the appellate bench on routine rulings on claim interpretation and obviousness.

Inter partes reviews were surely not meant to be abused for financial gain and were not designed to help invalidate otherwise valid patent claims. Unfortunately, this has been the result, and while there is consensus that the system is broken, there seems to be little consensus on how to fix it. A recent proposal raised in the House Judiciary Committee was designed to shield pharma patents from IPR review; however, it never made it out of committee.84 Other attempts have been made to contest the constitutionality of post-issuance reviews, though they too have been largely unsuccessful. 8 'Although the Supreme Court has been deliberating the constitutionality of IPRs in the Oil States case, the consensus among patent professionals is that the Court will likely uphold IPRs as constitutional.8 6 Other legislative attempts have focused on amending patent litigation laws, but because the issues arise during IPRs-not litigation-such reforms are unlikely to be of any help.87

In light of the lack of solutions to the current problem, I endeavor to put forward a novel approach to improve IPRs by borrowing from other procedures in order to cure the most egregious defects of the IPR process: the standing requirement is too low, the amendment procedure is too draconian, and the claim interpretation is too biased towards the patent challenger.